Perpetuating pay discrimination: Next retail workers win equal pay claims worth circa £30 million

A long-running Equal Pay claim concerning mostly female store workers comparing themselves with mostly male warehouse workers was decided by an Employment tribunal in August, six years after it began. We consider below what happened in this case and what it might mean for other employers.

Equal Pay claims are complex and not necessarily the easiest to understand. Essentially, if two roles can be identified as having “equal value” then the employer has to pay the same rate for each role- unless they can justify the difference in pay by way of a “material factor”. An Employment Tribunal can find that that material factor is either directly discriminatory or (more likely) that it puts one sex at a disadvantage and is therefore indirectly discriminatory. If so, the employer must show that it was a proportionate means of achieving a legitimate aim.

So what happened in this case? Well, the Employment Tribunal found that the Next in-store workers had succeeded in establishing that their work was of “equal value” to that of the warehouse staff, and then ruled that that difference in pay could not be justified. Next had tried to argue that the pay difference was due to market forces, their need to recruit and retain good staff and to boost productivity. The ET found that these were aims motivated by profitability and not sex (and therefore not directly discriminatory). So far, so good.

However, the fact that the instore cohort was around 75% female, and the warehouse cohort was around 50% male was enough to show a disparity. That meant that Next had to then justify that paying them less was a proportionate way of achieving a legitimate aim.

It is well established that cost alone cannot be used to justify paying less- this would mean perpetuating pay discrimination and indeed contradicts what the Equal Pay legislation is trying to achieve. Although this wording was not used in this case- it is like saying “We pay women lower wages because they have always been lower”. This is not a reason for maintaining such practices. However, cost can be a legitimate aim where it is not the only aim- often referred to as the “costs plus” approach. In this case, the Employment Tribunal found that cost was the only aim and thus could not satisfactorily justify the inequality in pay.

Key takeaways for employers

• Business objectives need to be clear as to why one cohort may need to be paid at a higher rate to another (and having done so historically is not a reason to continue).
• There needs to be clear justification of why profitability is affected and why some staff are harder to recruit/retain than others. Reliance on the market rate is not enough.
• Clear risk assessment needs to be undertaken in terms of categories of work and where disparities exist.

Finally, although this decision is important in terms of its findings, we must apply caution in that it is only a first-level decision and Next has stated that they intend to appeal.

Furthermore, it was a case that – as always- was decided on its own facts. Whether or not similar cases featuring other household names such as Tesco and Asda will be decided in the same way remains to be seen.